Stephen T Chifamba
South Africa’s retail giant, Pick n Pay Stores financial statements for the year ended 1 March 2020 reflects an overhanging effect of currency changes and hyperinflation in its Zimbabwe operations, headlined by a 39% fall in income.
The Group, which owns a 49% stake in Zimbabwe retail chain stores TM Pick n Pay said its share of associate’s income fell from R109.0 million last year to R66.3 million this year, impacted by foreign exchange losses on the translation of foreign liabilities, and includes a net monetary gain of R43.2 million on the application of hyperinflation accounting in the region.
In a statement accompanying the financial statements, the Group stated, “Over the past 18 months, the Group’s associate in Zimbabwe, TM Supermarkets, has grappled with severe currency shortages, currency devaluation, high levels of inflation, shortages of fuel and other staple goods, and shortages of power and water.
“The financial performance of TM Supermarkets reflects these significant challenges”.
The Group incurred net capital losses of R177.9 million in FY20, against net capital profits of R25.4 million last year.
“The capital loss is driven by the Group’s R173.6 million impairment of its investment in associate in Zimbabwe due to hyperinflation, alongside losses on the sale of stores assets in respect of store closures and the conversion of company-owned stores to franchise stores,” the Group said.
Earnings per share (EPS) decreased by 11.7% to 250.90 cents, reflecting the impact of the Group’s capital losses this period, largely due to hyperinflation in Zimbabwe, against capital profits in the prior year.
Headline Earnings per Share (HEPS) increased by 2.6% to 287.89 cents, reflecting the impact of the Group’s share of hyperinflation gains in TM Supermarkets in Zimbabwe.
Meanwhile, the Group’s comparable Headline Earnings per Share (Comparable HEPS), the most widely used profit measure in South Africa fell to 278.81 cents from 280.60 cents last year excluding the impact of hyperinflation accounting in Zimbabwe.
“Comparable Diluted Headline Earnings per Share is also flat year-on-year at 277.36 cents”.
Notwithstanding the impact of currency adjustments, Pick n Pay said the hard work of the TM Supermarkets team over the past few years to build customer and supplier loyalty has paid off in difficult times, keeping its shelves stocked and has been rewarded with market share growth.
Resultantly, TM Supermarkets was recognised as the 2019 Retailer of the Year in Zimbabwe, alongside numerous other community-based awards.
“TM Supermarkets is able to remit funds to South Africa as liquidity becomes available in the region, reducing its amount owed to Pick n Pay from R132.9 million at the beginning of the year, to R40.1 million at year-end,” the Group said.
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